Regulator approves higher tobacco prices

New prices for Virginia, burley and native tobacco have been approved by the National Tobacco Administration (NTA) for the next two trading years.

Virginia tobacco, which takes up almost 60 percent of the country’s tobacco production area, will see floor prices rise to P82 per kilo for Grade AA, P81 for A, P80 for B, P78 for C, P70 for D, P69 for E; P60 for F1, and P57 for F2.

The previous prices were P81 for AA, P79 for A, P77 for B, P75 for C, P68 for D, P67 for E, 59 for F1, and 56 for F2.

For burley, P2 adjustments were ordered for the A to F grades to P70, P67, P58, P47, P46, and P38 per kilo, respectively.

The new per kilo floor prices for native tobacco are P71, from P70, for high-grade; P60 from P58 for Medium 1; and P50 from 48 for Medium 2.

Per kilo prices for rejects were retained at P46 for Virginia, P28 for burley, and P40 (L-1) and P25 (L-2) for native types.

Leaf buyers had insisted that there should be no price increase for low grades or rejects to discourage production of low quality tobacco.

Tobacco is the only industrial crop in the country that enjoys a minimum floor price set by the government. This is based on prevailing market conditions such as production costs and a reasonable margin of profit for stakeholders.

Farmers wanted prices to go up by as much P16.77 per kilo given higher farm input costs, while buyers pushed for a status quo given the impact of lower cigarette sales caused by increasing excise taxes and a nationwide ban on smoking in public places.

With prices for the next two years having been set, NTA Administrator Robert Seares said the agency would now focus on the reduction of production costs incurred by farmers.

The setting of the minimum floor price provides tobacco farmers a guaranteed return on investment of at least 25 percent for expenses. The actual buying price, which is based on prevailing market prices, is usually higher than the minimum floor price.